The Canadian dollar could face severe cross-currents this week as traders look to the next rate announcement from the Bank of Canada, as well as results of the Quebec election and the latest jobs numbers.

Stock markets could also be volatile as traders also look to a rate announcement Thursday by the European Central Bank for definite moves to keep the lid on borrowing costs of the most vulnerable eurozone members, including Spain and Italy.

And the results of the August non-farm payrolls report could provide a clue as to whether the U.S. Federal Reserve thinks the economy is underperforming to a point where it could launch another round of stimulus.

There is no doubt among economists that the Canadian central bank will opt Wednesday to leave its key interest rate unchanged at 1% amid a fragile global economic recovery and large parts of Europe in recession.

Traders will look to the central bank’s announcement for any indication as to when rates may rise but it’s not expected the Bank of Canada will change its language from the last announcement when it signalled an eventual tightening bias, indicating that rates would rise at some point.

“I suspect it will be more of the same for the bank,” said Doug Porter, deputy chief economist at BMO Capital Markets

“And the reality is that they, like everyone else, are likely waiting to see what unfolds in the critical events ahead in Europe, starting with the ECB meeting on Thursday.”

But ahead of that morning announcement, currency traders will already be digesting the results of Tuesday’s general election in Quebec and what it means to political stability.

The election campaign got very little, if any, notice on markets even as a CROP survey released Friday suggested that the PQ was the front-runner, leading by four percentage points in the popular vote.

“The risk is underpriced and (under) recognized right now,” said Camilla Sutton, chief currency strategist at Scotia Capital, noting that there are so many factors weighing on the loonie this week.

At the same time, traders would see the CROP survey also indicated support for sovereignty has dropped eight percentage points during the campaign, while the number of undecideds has increased to 10% and support for Canadian federalism stands at 62%.

The numbers in that survey peg support for independence well below the level it was at three decades ago, when 40% of Quebecers voted “Yes” in a 1980 referendum.

The loonie could also be affected by Friday’s Canadian jobs data as economists think that 11,000 jobs were created during the month.

Stock markets buffetted this year by uncertainty as the eurozone debt crisis worsened could find some lift Thursday if the ECB unveils plans to launch another bond-buying program to keep borrowing costs under control. Ten-year bond yields in Spain and Italy pushed past the 7% level, which is considered unsustainable in the long run, earlier this summer.

Porter said it is possible the ECB move could be delayed “because there is a little bit of a game going on between the ECB and Spain, each waiting for the other to blink first,” said Porter.

“The view is that the ECB actually wants Spain to officially ask for assistance where Spain wants to see exactly what the ECB has up its sleeve so there is the possibility we don’t get a definitive answer next week. As long as the wait is perceived to be just a week or so.”

The week ends with the major economic report of the week, the U.S. August non-farm payrolls report. Economists forecast that the American economy likely created 127,000 jobs during August following an unexpected surge of 163,000 during July, while the jobless rate held steady at 8.3%.

The jobs data will provide an important clue whether the Fed will announce it is embarking on another round of stimulus, after Fed chairman Ben Bernanke said last week that the central bank will act to promote growth as needed.

U.S. stimulus hopes had risen in particular after the release in late August of minutes from the last Fed interest rate meeting Aug. 1 which said a growing number of members wanted to see the central bank do more to help the U.S. economy.

But economic data released since then, including better than expected job creation in July, rising retail sales and a recovering housing sector, actually point to a strengthening economy, meaning the Fed could find it hard to justify more easing, analysts say.

The Toronto stock market ended last week down 133 points or 1.1%, leaving the TSX about even where it started the year.